Insurance basics for families: protect income first, then health

Short answer: Insurance is protection, not an investment. For most families the order is simple. First, protect the earner’s income in case they die (term life cover). Second, protect against big hospital bills (health cover, including government schemes like PM-JAY if you’re eligible). Two low-cost government schemes, PMJJBY and PMSBY, give basic life and accident cover for under ₹500 a year. Since 22 September 2025, premiums (what you pay for the cover) for individual life and health policies carry no GST.
Paisavy explains how insurance works. We don’t compare or recommend insurers or policies.
The situation
Vijay, 30, is the only earner for his wife, their baby and his mother. An agent suggests a policy that “gives money back after 20 years”. Vijay isn’t sure what his family actually needs.
Term vs endowment: the key difference
| Term insurance | Endowment / money-back | |
|---|---|---|
| Pays out | Only if the insured person dies during the term (the years the policy runs) | On death, or a fixed amount when the policy ends (maturity) |
| Cost for the same cover | Low | Much higher |
| Purpose | Replace income for the family | Insurance mixed with savings |
An endowment plan “gives money back” because you paid much more in premiums. For the same budget, term insurance usually gives far bigger cover. So compare cover per rupee, not just returns.
Government schemes worth knowing
| Scheme | Who | Cover | Premium |
|---|---|---|---|
| PMJJBY (life) | Age 18–50 to join, with a bank account | ₹2 lakh on death from any cause | ₹436 a year, taken from your bank account automatically |
| PMSBY (accident) | Age 18–70, with a bank account | ₹2 lakh for accidental death or total disability; ₹1 lakh for partial disability | ₹20 a year |
| Ayushman Bharat PM-JAY (health) | Eligible families on the government lists; all citizens aged 70+ | Up to ₹5 lakh per family per year for hospital treatment | Free for eligible people |
A ₹ example
Fictional. Calculated by Paisavy.
Vijay and his wife both join PMJJBY and PMSBY: (₹436 + ₹20) × 2 = ₹912 a year, about ₹76 a month.
- If Vijay dies of illness: ₹2 lakh (PMJJBY).
- If he dies in an accident: ₹2 lakh + ₹2 lakh = ₹4 lakh.
The family’s basic needs cost ₹20,000 a month, which is ₹2.4 lakh a year. The schemes give a useful base. But they’d cover only about 10 months (illness) to 20 months (accident) of living costs, which is why many families also buy term cover worth several years of income.
Health insurance words to understand
- Sum insured: the most the policy pays in a year.
- Waiting period: the time before some conditions are covered, such as illnesses you already had when you bought the policy (pre-existing diseases).
- Co-pay: the share of every bill that you pay yourself.
- Room-rent limit: a cap on the room price. If you pick a more expensive room, the insurer can cut the whole claim, not just the room charge.
- Cashless vs reimbursement: with cashless, the insurer pays the hospital directly. With reimbursement, you pay first and claim the money back later.
- Free-look period: a short time after buying when you can cancel and get your premium back.
If a claim is rejected
- Complain to the insurer in writing.
- Not sorted out? Use the complaint system of IRDAI (the insurance regulator), called Bima Bharosa: https://bimabharosa.irdai.gov.in
- After that, go to the Insurance Ombudsman, an office that settles complaints against insurers for free: https://www.cioins.co.in
What to check today
- Look in your bank passbook for a ₹436 or ₹20 debit around May–June. If you find one, you may already be a member of PMJJBY or PMSBY.
- If a parent is 70 or older, check whether they can get an Ayushman Vay Vandana card.
- Before buying any policy, ask: “How much cover do I get per rupee of premium, and what isn’t covered?”
Sources and review
- PIB — PMJJBY factsheet (May 2025): https://static.pib.gov.in/WriteReadData/specificdocs/documents/2025/may/doc202558551501.pdf
- PIB — PMSBY factsheet (May 2025): https://static.pib.gov.in/WriteReadData/specificdocs/documents/2025/may/doc202558551401.pdf
- PIB — PM-JAY for senior citizens 70+ (Sep 2024): https://static.pib.gov.in/WriteReadData/specificdocs/documents/2024/sep/doc2024923400001.pdf
- PIB — GST exemption on individual insurance premiums from 22 Sep 2025: https://www.pib.gov.in/PressReleasePage.aspx?PRID=2163555
- IRDAI Bima Bharosa: https://bimabharosa.irdai.gov.in · Insurance Ombudsman: https://www.cioins.co.in
- Example calculated by Paisavy (
scripts/wave2_examples.py).
Educational information, not financial advice. Found an error? Tell us → · Corrections log